So now hedge fund manager David Einhorn of Greenlight Capital, who publicly shorted Lehman before it's demise, is positioning for a currency crisis by buying gold. He's not singling out the US Dollar either, he doesn't have faith in the Yen, Euro or Pound. The full speech PDF is available at Rolfe Winkler's Reuters blog post. Interesting points he made:
"I believe there is a real possibility that the collapse of any of the major currencies could have a similar domino effect on re-assessing the credit risk of the other fiat currencies run by countries with structural deficits and large, unfunded commitments to aging populations..."
"I have seen many people debate whether gold is a bet on inflation or deflation. As I see it, it is neither. Gold does well when monetary and fiscal policies are poor and does poorly when they appear sensible. Gold did very well during the Great Depression when FDR debased the currency. It did well again in the money printing 1970s, but collapsed in response to Paul Volcker’s austerity. It ultimately made a bottom around 2001 when the excitement about our future budget surpluses peaked.
Prospectively, gold should do fine unless our leaders implement much greater fiscal and monetary restraint than appears likely. Of course, gold should do very well if there is a sovereign debt default or currency crisis..."
"....When I watch Chairman Bernanke, Secretary Geithner and Mr. Summers on TV, read speeches written by the Fed Governors, observe the “stimulus” black hole, and think about our short-termism and lack of fiscal discipline and political will, my instinct is to want to short the dollar. But then I look at the other major currencies. The Euro, the Yen, and the British Pound might be worse. So, I conclude that picking one these currencies is like choosing my favorite dental procedure. And I decide holding gold is better than holding cash, especially now, where both earn no yield.
Along these same lines, we have bought long-dated options on much higher U.S. and Japanese interest rates...."
He was right about Lehman and the bond insurers, so keep an eye on gold. He did say he could be wrong if "our leaders implement much greater fiscal and monetary restraint" (Volcker style interest rate policy). But he's been right more than he's been wrong... We shall see!